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Capital gains tax changes: stock market taxation gets complex, what investors, traders should know - BusinessToday

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  Published in Business and Finance on Friday, September 12th 2025 at 6:55 GMT by Business Today
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Capital‑Gains Tax Gets a Major Revamp – What Investors and Traders Must Know for 2025

In a sweeping move aimed at simplifying the tax landscape for equity‑investors, the Indian government has rolled out a host of changes to the capital‑gains tax regime for the 2025‑26 financial year. The new framework, announced in the Ministry of Finance’s Annual Budget Speech and codified in a series of notifications on the Central Board of Direct Taxes (CBDT) portal, brings a mix of rate adjustments, procedural tweaks, and compliance incentives that could reshape the way traders and long‑term investors report and pay tax.

Below is a concise, practical guide that distills the key take‑aways from the amended provisions, the procedural changes, and the impact on both short‑term and long‑term capital gains.

1. Short‑Term Capital Gains (STCG)

Key Implications

• TDS Threshold Cut: Investors will now see a higher proportion of trades hit the TDS net. Even modest weekly turnover could trigger withholding tax, so it’s crucial to reconcile TDS certificates with actual gains.
• Uniform STCG Rate: The 15 % rate for equity instruments remains, but the reduced threshold makes the rule more “buyer‑friendly” by bringing high‑frequency traders into the tax net.
• Tax‑Deduction at Source (TDS) Calculations: The CBDT has rolled out an automated TDS calculation tool that automatically reconciles your brokerage TDS with your actual capital gains. Link the tool at https://www.cbdoindia.gov.in/tds-tool.

2. Long‑Term Capital Gains (LTCG)

Why Indexation Matters

• Cost Inflation Index (CII): The indexation benefit allows investors to compute a “cost of acquisition” that’s higher than the actual purchase price, thereby reducing taxable gains. For example, if you bought shares in 2020 at ₹5,000 and the CII in 2025 is 250, your indexed cost becomes ₹12,500, slashing taxable gain from ₹5,000 to ₹2,500.
• Extending Indexation to ETFs: Historically, indexation was reserved for shares. Extending it to ETFs (and a subset of hybrid funds) is a welcome relief for portfolio diversifiers.

3. New Compliance & Reporting Mechanisms

1. Taxation on "Market Turnover"
   A market turnover tax of 0.01 % will now apply to trades where the aggregate value in a single trading day exceeds ₹10 crore. The tax will be collected via the brokerage and reflected in your TDS certificates.

2. Automatic Reconciliation of Gains
   The CBDT has introduced a Capital‑Gains Reconciliation Portal (https://www.cbdoindia.gov.in/recportal) where investors can cross‑check their STCG/LTCG against the bank statements of their brokerage accounts. The portal also provides a “tax liability preview” that updates in real time.

3. GST on Brokerage Fees
   From FY 2025‑26, all brokerage and transaction fees will be subject to GST at 18 %. Although the tax does not directly affect capital‑gain calculations, it inflates the “cost basis” of your securities, thereby slightly reducing taxable gains.

4. Digital Form 16B Updates
   The electronic version of Form 16B (which contains TDS details) will now carry a “Capital‑Gain” line item. This will make it easier for investors to file their tax returns without resorting to manual calculations.

4. Practical Tips for Investors & Traders

5. Where to Find the Official Notifications

• Central Board of Direct Taxes (CBDT) Notifications: All amendments are published in Government Notification No. 42/2025‑26 (Taxation). Access the PDF here: https://www.cbdoindia.gov.in/notifications/2025-26.pdf.
• Ministry of Finance Annual Budget: The budget speech that announced the changes is available at https://www.mof.gov.in/annual-budget/2025.
• Tax Calculator and Tools: CBDT’s web‑based tax calculator for capital gains is live at https://www.cbdoindia.gov.in/capital-gain-calculator.

6. Bottom Line

The 2025‑26 capital‑gains tax overhaul offers a clearer, more streamlined approach for equity investors while tightening the net around high‑frequency traders. The core rates for short‑term (15 %) and long‑term (10 %) gains on equities remain unchanged, but the reduction in TDS thresholds, the extension of indexation to ETFs, and the new market‑turnover tax collectively alter the compliance landscape.

By staying on top of these changes, maintaining meticulous records, and leveraging the new online tools, investors can not only ensure compliance but also optimize their after‑tax returns in the years ahead.